Apr 2012


Apr 2012

Invest in Gold

By StoneX Bullion

Why Invest in Gold

The main reason to invest in gold is that its price for this commodity has been overall continually increasing since 2007. People choose this kind of investment because gold, as a commodity, has an intrinsic value that is not affected by factors that affect currencies, like: inflation, deflation, political decisions, and economic distresses in general. On the contrary, the gold price increases when a financial crisis or a political crisis appears.

When individuals decide to invest in gold they have different choices, depending on the level of involvement from a particular individual. Physical gold in the form of bars and coins is one alternative. The other one is to invest in gold in the form of futures and derivatives. The latter form is mainly for people that like to get involved in what happens on the gold spot market, traders that speculate on the evolution of gold.

The decision to invest in gold should automatically be supported by an interest in the evolution of the gold spot price, which appears twice every day. It will show you when it is the most appropriate time to make a profitable investment.

Possibilities to Invest in Gold

There are individuals that prefer to invest in gold in its physical form and it is understandable. It is quantifiable, you know exactly what the weight of your investment is, and therefore you know for sure what its value is. It is also easily obtainable, you can buy gold coins or bars from dealers or you can go to a bank.

Comparing bullion coins with bullion bars, it could be stated that a less amount of money is necessary when you invest into coins. They are also beautiful assets which can be substantially profitable when the demand for a particular coin increases. When that happens, the premium for the gold coin is the one that increases, which represent the amount of profit made by the investor.

However, gold bars have a smaller premium so they are amongst the preferred ways to invest in gold, for some people. It is true that more funds are needed but the premium decreases with the increase of the weight of gold bars. The preferred gold bars by traders and banks are the kilobars.

The largest gold bar is the perfect example, with numbers, why people should invest in gold. In 2005, when it was produced at a weight of 250 kg, was valued at US $3,684,000. In the meantime, the price of gold increased considerably, so it was valued at US $15.3 million.

When to Invest in Gold

There is always a right time to invest in gold. However, when you feel that you no longer trust the evolution of international currencies and you do not want all your funds to be kept into one or maybe two currencies, you should invest in gold. It will give you a feeling of safety, thanks to its strong evolution, and your portfolio will be a diversified one, which is always good.

If you decide to invest in gold spot, which is traded on the spot market, pay attention because professional dealers acting on that market will not trade with private individuals and the reason is that they engage only in large transactions in order to be profitable.